Freedom Exp., Inc. v. Merchandise Warehouse Co., Inc.

• Decision Date: 10 March 1995
• Docket Number: No. 49A02-9309-CV-490,49A02-9309-CV-490
• Citation: 647 N.E.2d 648
• Parties: FREEDOM EXPRESS, INC., Appellant-Defendant, v. MERCHANDISE WAREHOUSE COMPANY, INC., Appellee.
• Court: Indiana Appellate Court

Page 648

647 N.E.2d 648

FREEDOM EXPRESS, INC., Appellant-Defendant, v. MERCHANDISE WAREHOUSE COMPANY, INC., Appellee.

No. 49A02-9309-CV-490.

Court of Appeals of Indiana,

Second District.

March 10, 1995.

Patrick C. Badell, Robert G. Gulde, Badell & Wilson, P.C., Rushville, for appellant.

Mary F. McFearin, Foley & Pool, Indianapolis, for appellee.

OPINION

SULLIVAN, Judge.

Freedom Express, Inc. (Freedom) appeals the summary judgment granted to Merchandise Warehouse Co., Inc. (Merchandise) in a landlord/tenant action arising from alleged rent arrearage and property damage.

We affirm in part, reverse in part, and remand for further proceedings.

Freedom presents two issues for our review, which we restate as: (1) whether the trial court erred in granting Merchandise's motion for summary judgment; and (2) whether the trial judge abused his discretion in denying Freedom's first and amended motions for leave to file a counterclaim. ¹

On July 19, 1990, Merchandise, as lessor, and Freedom, as lessee, entered into a written lease agreement. Pursuant to the lease, Freedom agreed to pay $500.00 per month to Merchandise for the use of approximately 2,000 square feet of warehouse space over a term of twenty-four months, commencing July 23, 1990, and ending July 22, 1992. Merchandise and Freedom each agreed to pay one-half of the cost for Merchandise to erect a fence separating Freedom's leased space from the rest of the space within the building. Freedom occupied the warehouse space from July 23, 1990 to March 23, 1992, when it left without making any further payments to Merchandise under the lease.

On May 4, 1992, Merchandise filed suit for breach of the lease agreement and sought recovery for the unpaid rent. Merchandise also sought recovery of its cost to repair damage Freedom allegedly caused to the fence separating Freedom's property from the rest of the building, its cost to repair damage Freedom allegedly caused to two dock doors when it vacated the premises, its cost to clean the premises, and its attorneys fees pursuant to the lease agreement. On March 2, 1993, Merchandise filed a motion for summary judgment, in support of which it filed a memorandum, and an affidavit of its general manager, Donald Foley. Later, Freedom filed a counter-affidavit signed by its president, Ronald Jarboe (Jarboe). Freedom also filed a Motion for Leave to File Counter Claim, which the trial court denied.

On May 21, 1993, the day of the hearing on Merchandise's summary judgment motion, Freedom filed an Amended Motion for Leave to File Counter Claim. Four days later, the trial court denied that motion, and granted Merchandise's Motion for Summary Judgment, awarding it a total of $7,620.00 for rent arrearage, costs to repair property damage, cleaning costs, prejudgment interest, and attorney's fees.

All of the above facts are undisputed. Other facts will be set forth where appropriate or necessary.

I. Summary Judgment

A. Rent Arrearage

By its own admission, Freedom refused to pay rent due under the lease agreement after vacating the warehouse, and the trial court awarded Merchandise $2,500.00 in back rent as part of its summary judgment. Merchandise argues that the facts dispositive of the rent issue are not disputed because the terms of the lease agreement, which required Freedom to continue to pay rent until the end of the term, governed the rights and obligations of the parties. ²

Freedom does not now, nor did it at the trial court level, point to any provision in the lease agreement which would excuse its obligation to pay rent before the lease term expired. Instead, Freedom argues that a strong odor caused by stored chemicals irritated its workers and created a condition in the warehouse which both necessitated and justified its departure, and that this condition excused Freedom's obligation to pay the rent for the remaining lease period. Although Freedom did not label the principle as such in its Answer or in any other pleading, ³ the practical import of its argument asserts grounds for constructive eviction. ⁴ The critical question then becomes whether Freedom may properly present a constructive eviction argument when it has not specifically plead it as an affirmative defense nor asserted it in a counterclaim. We hold that it cannot.

In general, lessees may assert constructive eviction as the basis for a claim or a counterclaim against a lessor whose act or omission has materially deprived the lessee of the beneficial use or enjoyment of the leased property to such a degree that the lessee must leave. ⁵ See Williams v. Hittle (1994) 2d Dist.Ind.App., 629 N.E.2d 944, 950-51, trans. denied; T & W Bldg. Co. v. Merrillville Sport & Fitness, Inc. (1988) 3d Dist.Ind.App., 529 N.E.2d 865, trans. denied; Sigsbee v. Swathwood (1981) 3d Dist.Ind.App., 419 N.E.2d 789. Lessees also may assert constructive eviction as an affirmative defense to a suit initiated by the lessor following the lessee's departure and refusal to pay rent. See Lafayette Realty Corp. v. Vonnegut's, Inc. (1984) 1st Dist.Ind.App., 458 N.E.2d 689; State v. Boyle (1976) 1st Dist., 168 Ind.App. 643, 344 N.E.2d 302, 304.

Because Freedom has claimed the chemical odor to justify its leaving the warehouse and its refusal to pay the remaining rent due under the lease agreement, it constitutes a defense. It should have asserted such an argument as an affirmative defense. The determination of whether a defense is affirmative depends upon whether it merely controverts an element of the plaintiff's prima facie case or whether it presents matter outside the scope of the prima facie case. Rice v. Grant County Bd. of Comm'rs (1984) 2d Dist.Ind.App., 472 N.E.2d 213, trans. denied. As stated in Rice, "[A]n affirmative defense is one upon which the proponent bears the burden of proof and which, in effect, admits the essential allegations of the complaint, but asserts additional matter barring relief. Ind.Rules of Procedure, Trial Rule 8(C)." 472 N.E.2d at 214. Constructive eviction requires the proponent to bear the burden of proof. Moreover, Freedom raises the chemical odor as a way to justify its departure and to bar Merchandise from collecting back rent. Accordingly, Freedom's constructive eviction argument meets the criteria that Indiana courts have required for an affirmative defense.

Pursuant to Rule 8(C) of the Indiana Rules of Trial Procedure, a party seeking the benefit of an affirmative defense must raise and specifically plead that defense or it is waived. 1 Harvey, Indiana Practice: Rules of Procedure Annotated § 8.7, at 380 (2d ed. 1987); Piskorowski v. Shell Oil Co. (1980) 3d Dist.Ind.App., 403 N.E.2d 838, 847. This is true even if the affirmative defense is not specifically enumerated among those defenses set forth in Trial Rule 8(C). 1 Harvey, supra § 8.7 at 382. Because Freedom did not specifically plead constructive eviction as an affirmative defense to its requirement to pay back rent in its Answer or otherwise, it has waived its right to do so now.

Alternatively, Freedom could have chosen to claim constructive eviction in a counterclaim pursuant to Rule 13(A) of the Indiana Rules of Trial Procedure, but it did not do so initially and it did not receive leave of court to file one thereafter. ⁶ Freedom cannot, via discovery responses and an affidavit designated to the trial court, create a factual issue based upon an argument which the Indiana Rules of Trial Procedure require to have been raised in another manner. Accordingly, because no factual issues remain concerning whether Freedom must pay the back rent, we determine that the trial court did not err in awarding Merchandise $2,500 in rent arrearage.

B. Costs to Repair Property Damage and Clean-up Costs

The affidavits and memoranda supporting each party's position upon the summary judgment motion reveal several disputed facts concerning the condition of the warehouse after Freedom vacated. Freedom insists that "it is quite apparent that the trial court had to weigh conflicting evidence in the parties' affidavits in order to reach its decision on summary judgment and the trial court found that the affidavit submitted by [Merchandise] to be [sic] more credible than the affidavit submitted by Freedom." Brief of Appellant at 12. It is this alleged finding which Freedom claims as reversible error in the context of a summary judgment ruling. ⁷

Despite the apparent conflicting facts, Merchandise maintains that a good faith dispute does not exist, arguing that the only issue of material fact raised by Jarboe's counter-affidavit is Jarboe's credibility because it contradicts answers he earlier submitted under oath. ⁸ Accordingly, Merchandise concludes that the trial court properly found that Freedom could not use such contradictory statements to defeat Merchandise's summary judgment motion. We disagree because we do not find contradictions in Freedom's positions.

Merchandise first finds an inconsistency between Freedom's discovery responses and Jarboe's counter-affidavit regarding damage and subsequent repair to the warehouse's front dock doors. In response to Merchandise's Request for Admissions, Jarboe admitted that the only damage to the warehouse was to the "docks" and the brick around the front dock doors. Record at 76. Those responses also asserted that Merchandise refused to allow Freedom to repair either the dock or the bricks. ⁹ Later, in his counter-affidavit, Jarboe testified that Freedom "did cause some damage to the doors, however, the damage was repaired prior to [Freedom] leaving[.]" Record at 66.

Merchandise's next alleged inconsistency involves the allegedly cluttered condition of the warehouse after Freedom moved out. In answering one of Merchandise's interrogatories, Freedom indicated that it tried to leave the premises in the same condition as they were found, but that Merchandise would not let it. Record at 88. Jarboe then stated in his counter-affidavit that Freedom "left the...